Defendants Can’t Claw Back

Defendants Can’t Claw Back Documents in DR Distributors Case: eDiscovery Case Law

eDiscovery Case Week continues with a ruling so new, it just happened last Friday! In DR Distribs. v. 21 Century Smoking, No. 12 CV 50324 (N.D. Ill. July 22, 2022), Illinois District Judge Iain D. Johnston finding a “fundamental failure in the privilege review process”, found a waiver of the marital communications privilege in ruling that defendants can’t claw back inadvertently produced documents. But he also ruled that the defendants had not waived subject matter and that they “have not waived any objection as to admissibility”.

Case Discussion

In this case involving infringement claims over similar trademarks for electronic cigarettes (which was previously covered here and here by eDiscovery Today), Judge Johnston began his ruling by stating: “Discovery in this case was—and still is—cursed. The fact that this Court is issuing an opinion on a discovery problem a decade after this action was filed evidences that fact.” The defendants had three productions where there were disclosures of communications between the owner of 21 Century Smoking (Brent Duke) and his wife Laurie Duke: 1) on May 31/June 1, 2018, 2) on November 13, 2019 and 3) on March 19, 2021.

Based on these disclosures, the plaintiff filed a Motion for an Order Deeming the Marital Privilege Waived and for Other Relief. The defendants opposed the motion and sought to claw back the documents, relying on Federal Rule of Evidence 502 – and the fact that the Court—on its own—entered a Rule 502(d) order – as the proper standard to be applied to protect waiver of privilege.

Judge’s Ruling

After a detailed review of the productions, Judge Johnston first addressed the application of Rule 502 to the waiver of privilege for the documents in question, stating: “Defendants’ detrimental reliance strategy is bold. As will be seen, that bold strategy didn’t pay off for them. Defendants’ argument is summed up neatly in a single sentence: ‘During [the current defense counsel’s] production, i.e., after 1/19/21 ruling, [the current defense counsel] acted reasonably in focusing on complying with the Court’s order, while relying on the Court’s statement that it would apply FRE 502(d) to [the] ‘fullest extent possible’ and Rule 26(b)(5)(B) ‘liberally’.’…So, apparently, according to Defendants, the Court wears the jacket, at least partially, for their ‘inadvertent’ disclosure. But the Court refuses to accept any blame for Defendants’ failures.”

Among the reasons for supporting that refusal were the fact that “fact discovery cut-off was July 1, 2015”, “Defendants’ monumental ESI production blunders” forced the Court to “hold a five-day evidentiary hearing to determine what occurred”, and that the defendants were “explicitly told” that they would be required to produce “relevant and responsive documents that should have been produced years ago” and had a total of 120 days to do so. As Judge Johnston stated: “The chutzpah of Defendants’ argument is almost too much to take.”

But as Judge Johnston noted: “there are at least three significant problems with Defendants’ premise that the framework of Rule 502 applies and excuses their failures.” The first was the fact that “as the plain language of Rule 502 makes clear, the rule only applies to the attorney-client privilege and the work-product doctrine.” The second was the fact that “for some of the documents Defendants seek to claw back, the Court’s order had no causal effect” as they had already been produced before the order. And finally, Judge Johnston observed: “Although Rule 502(d) is a mighty powerful tool” (Judge Johnston included a reference to Magistrate Judge Andrew Peck (ret.) who stated that a Rule 502(d) order can be viewed as a “get-out-of-jail-free-card”), “at least some courts have found it still has limits…other courts have found that, despite the existence of a Rule 502(d) protective order, a completely reckless disclosure can result in waiver.”

Instead, Judge Johnston applied a three-part balancing test: “First, as a threshold matter, the court must determine if the document is privileged. If the document is not privileged, the inquiry ends. If the document is privileged, the court must determine if the disclosure was inadvertent. Lastly, even if the document is found to be privileged and inadvertently produced, the court must still determine whether the privilege was waived.”

Regarding the May 31/June1, 2018 production, Judge Johnston stated in finding the privilege was waived: “no evidence has been presented at all as to the precautions that were taken to prevent the disclosures” and that “no attempts were made to claw back those documents until June 11, 2021—3 years later.” Judge Johnston also found privilege was waived for the November 13, 2019 disclosures, stating: “Despite being privileged, there is no evidence that the production was “inadvertent” and Defendants have failed to meet their burden that the privilege was not waived…Those communications can’t be clawed back.”

Judge Johnston conducted a more in-depth analysis on the March 19, 2021, but found that “the Court has no idea what the privilege review process was or how it worked”, that the defendants’ failure to seek to claw back the documents for four months was “not timely”, that the defendants were given plenty of time to produce the documents, that the extent of the disclosure (hundreds of privileged documents) “weighs in favor of waiver” and that “to the extent Defendants’ counsel misunderstood the scope of Rule 502, that’s not a fairness issue; instead, that’s a competency issue.”

While Judge Johnston “found a waiver of the marital communications privilege” and that the defendants can’t claw back the documents, he also stated: “a finding of subject matter waiver does not necessarily follow” and also “Defendants have not waived any objection as to admissibility.”

So, what do you think? Are you surprised that Judge Johnston ruled the defendants can’t claw back the documents? Please share any comments you might have or if you’d like to know more about a particular topic.

Case opinion link courtesy of eDiscovery Assistant, an Affinity partner of eDiscovery Today.

Disclaimer: The views represented herein are exclusively the views of the author, and do not necessarily represent the views held by my employer, my partners or my clients. eDiscovery Today is made available solely for educational purposes to provide general information about general eDiscovery principles and not to provide specific legal advice applicable to any particular circumstance. eDiscovery Today should not be used as a substitute for competent legal advice from a lawyer you have retained and who has agreed to represent you.

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